SP2?
You have not disabled DNS Service have you, for a hosts file program or similar?
Check the interdependencies here :
http://www.blackviper.com/WinVista/Services/Internet_Connection_Sharing_(ICS).htm
All services
http://www.blackviper.com/WinVista/servicecfg.htm
Something related here :
http://support.microsoft.com/kb/937168
Quick How to
http://www.pctipsbox.com/how-to-internet-connection-sharing-in-windows-vista/
MS How to
http://windowshelp.microsoft.com/Windows/en-US/help/bfd3bd31-82f0-4b9c-9cde-fb92bc2b14771033.mspx
Done here
http://www.trap17.com/index.php/Internet-Connection-Sharing-Xbox-360-Laptop_t54749.html
Xbox Help (make sure you have the right controller)
Rob - Bicycle